A port construction project, backed by Chinese investment, in Colombo, Sri Lanka. Photo: Reuters

China’s direct investment overseas is likely to decline this year, according to a government think tank, reversing nearly a decade and a half of rapid increases that fueled global booms in infrastructure and real estate from Africa to Australia.

Greater scrutiny of outbound deals by the government and the prospect of tougher trade measures in the U.S. and other countries are likely to deliver a hit to Chinese investments in foreign plants, resources, real estate and other physical assets, said economists at the Chinese Academy of Social Sciences.

In recent years, blessed by the government’s desire to lift China Inc.’s global profile, overseas direct investment, which doesn’t include things like stocks and bonds, has been growing at an annualized rate of about 35% since 2003. Direct investment is expected to hit a fresh record of $170 billion in 2016, China’s top economic planning official said this week.

For this year, “we’re still seeing strong desire by companies to invest in foreign markets,” said Zhang Ming, a senior member of a team of economists at the think tank that produced an analysis of China’s foreign investment. “But a combination of tighter domestic policies and heightened political risks overseas mean outbound investments for 2017 would be lower than the level in 2016.”

Mr. Zhang estimates that total Chinese direct investments will drop to the level seen in 2015, at about $118 billion, the first time outbound Chinese investment exceeded foreign direct investment in China.

The expected turnaround matters to the world as China has become an important source of capital for everything from oil pipelines to industrial parks and real estate. The seeming abundance of Chinese money, for instance, has helped boost property prices from Sydney to New York.

Prodding the outward surge is China’s own slowing economy and a weakening yuan, which is driving businesses and individuals alike to look elsewhere for better returns. Despite the recent rebound of industrial profits and price levels, growth in the Chinese economy remains lackluster, propped up by spending on property while traditional drivers like heavy industry and exports lose steam. Official data released Friday show that Chinese exports fell a steeper-than-expected 6.1% last month from a year earlier and declined 7.7% for the year.

Now, with capital outflows intensifying, further pressuring the yuan, Chinese authorities have put in place measures aimed at slowing the pace of outbound investments by Chinese companies. The new controls, imposed in late November, provisionally remain in effect until the end of September, just ahead of a major reshuffle of the top echelon of the ruling Communist Party late this year. A main reason for the measures, Chinese officials say, lies with growing concerns over companies faking deals just for the purpose of moving money out.

Meanwhile, the prospect of higher tariffs and other protectionist measures by governments in the U.S. and other longtime favorites of Chinese money may shrink the space for investments from China. An analysis of 57 countries by Mr. Zhang and a team of economists at the academy’s Institute of World Economics and Politics shows rising political risks associated with Chinese companies’ investments in both developed economies including the U.S. and South Korea and developing nations like Mexico.

In the U.S., in particular, with president-elect Donald Trump having repeatedly threatened to adopt a tough stance on China, “it’s likely that the U.S, will more strictly control Chinese investments in technology-related sectors,” Mr. Zhang said.

In recent years, China’s investment appetite has evolved beyond oil fields and housing estates to industrial robots and semiconductors, raising alarms in Europe and the U.S. about risks to their industrial competitiveness.

For semiconductors—the brains inside everything from smartphones to guided missiles—the U.S. is trying to restrict Chinese investment. China is heavily reliant on other countries for its supply. Beijing has announced plans to develop its own chip-making capabilities, both for economic and national security reasons. Backed by government funds, China outbound semiconductor investment soared to $17.6 billion from 2014 through 2016, versus $543 million in the three years before that, according to Dealogic.

In December, President Barack Obama took the rare step of banning a Chinese investment fund from buying German semiconductor firm  Aixtron SE. A White House advisory panel said this month that Washington should increase scrutiny of Chinese investments, especially in chips.